Although it has not managed to secure labour agreement to create a separate company for its low-fare venture, United Airlines is confident that Ted "can be value creating to the mainline carrier", says Glenn Tilton, United's chairman.

The major rolled out its new low-fares unit in Denver in mid-November to widespread scepticism and considerable derision over the name. The operation, a new improved version of the Shuttle by United that was tried in the western USA as a response to Southwest, but shut down after 11 September, will start flying from Denver in February on leisure routes such as Las Vegas, New Orleans and Phoenix, with 19 Airbus A320s. That fleet will grow to 42 aircraft and later also serve routes from San Francisco and Los Angeles. The A320s will be converted from United's fleet to feature a 156-seat cabin, with 40% of the seats offering more legroom in an economy-plus class, says Tilton.

Ted will not compete with United, but will be integrated into its hub network and be part of its frequent flyer programme, he adds. It will soon move into United's Washington Dulles hub as well, says Tilton.

Its first routes will put Ted in direct competition with Denver's local low-cost carrier, Frontier Airlines. In Frontier, United faces a different proposition from Southwest. Unlike Southwest, the airline offers amenities such as reserved seats and, in the next few months, more in-flight entertainment. Morgan Stanley analyst William Greene believes Frontier will have lower operating costs than Ted and so will not be threatened. Much of Ted's traffic will come from United mainline flights, he adds.

Source: Airline Business